Estate tax storm threatens farm country

What is in this article?:

• Unless Congress extends the exemption and rates, or even better, eliminates the estate tax, a $1 million exemption and a top tax rate of 55 percent will kick in on Jan. 1, 2013.

• Higher farmland values mean that more people will face the difficult task of figuring out how to pay the estate tax and keep the farm in the family — without having to sell land or other assets needed to farm.

Farmland values are booming. Minnesota farmland prices are nearly 30 percent higher than a year ago, according to the Federal Reserve Bank of Minneapolis. It’s a similar catastrophe in Iowa where, an Iowa State University survey shows, high corn and soybean prices have driven average farmland values to a new record of almost $7,000 per acre.

I know what you’re thinking: “Isn’t that good news for farmland owners?”

Well, yes, it is good news. That is, unless the farm family patriarch or matriarch dies after December 2012, when current estate tax relief will end. Higher farmland values mean that more people will face the difficult task of figuring out how to pay the estate tax and keep the farm in the family — without having to sell land or other assets needed to farm.

Estate tax relief would have expired last year, but Congress passed a bill to set the exemption at $5 million and the top tax rate at 35 percent for two years. Unless Congress extends the exemption and rates, or even better, eliminates the estate tax, a $1 million exemption and a top tax rate of 55 percent will kick in on Jan. 1, 2013.